Have equity in your home? Want a lower payment? An appraisal from Anderson & Associates can help you get rid of your PMI.

A 20% down payment is usually accepted when buying a house. Since the liability for the lender is often only the remainder between the home value and the amount outstanding on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value changesin the event a borrower is unable to pay.

During the recent mortgage boom of the mid 2000s, it was widespread to see lenders requiring down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental policy covers the lender in case a borrower doesn't pay on the loan and the value of the home is lower than what is owed on the loan.

Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible, PMI is pricey to a borrower. Contradictory to a piggyback loan where the lender consumes all the losses, PMI is favorable for the lender because they obtain the money, and they get the money if the borrower doesn't pay.

How home buyers can keep from paying PMI

The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, savvy home owners can get off the hook sooner than expected.

Since it can take countless years to arrive at the point where the principal is only 20% of the original amount borrowed, it's necessary to know how your home has grown in value. After all, every bit of appreciation you've accomplished over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not be following the national trends and/or your home could have gained equity before things calmed down, so even when nationwide trends predict decreasing home values, you should realize that real estate is local.

An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Anderson & Associates, we know when property values have risen or declined. We're experts at determining value trends in Vancouver, Clark County and surrounding areas. Faced with data from an appraiser, the mortgage company will generally do away with the PMI with little effort. At which time, the homeowner can enjoy the savings from that point on.

Want to learn more about PMI and the Homeowners Protection Act? Click this link:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year